Dark inflation

Last Thursday evening (March 28), the Study Group held a public discussion to share and elicit others’ perspectives on the “Long Emergency” we are entering (to use James Kunstler’s phrase).

As explained then, I believe this capital-C Crisis has begun to indirectly affect nuclear projects, as illustrated by what might be called “dark inflation” in National Nuclear Security Administration (NNSA) capital projects and programs.  “Dark inflation,” for lack of a better term, is the mystery left when the usual explanations for NNSA cost overruns are weighed and found wanting.[1]

Superficially the causes of NNSA cost overruns are fairly straightforward.  Organized greed in various simple forms causes much of the cost run-up and would merit a book-length study.  Deception, bureaucratic cowardice, and incompetence (usually involving rosy or entirely fabulous assumptions) cause another increment.[2]  The special crony-capitalistic arrangements that define the political environment of large NNSA projects cause another increment, which is related to the power imbalance between contractors and the federal government.  At the three nuclear labs this amounts to a kind of blackmail, based on the power given lab directors by the annual stockpile certification process.[3]  Increases in commodity prices are another cause.  And so on.[4]

Even before (but especially since) the retirement of David Hobson (R-OH), the above cost-inflating factors have never been discussed in official Washington with any degree of honesty or clarity.  Doing so would expose the corrupt foundations of the nuclear security enterprise to an uncomfortable degree.  These and similar factors are however sufficient to explain all of what is unique and extreme about NNSA’s cost inflation and project failures, at least on the surface.

But even if we account for the normalized political cowardice and the institutional myths and practices that almost mandate NNSA administrative failure,[5] and include in our accounting private-sector greed empowered by cartel contracting arrangements,[6] some mystery remains.  Humpty-Dumpty is falling, and all the best nuclear managers and management systems in the world will not be able to put him together again.  In my opinion, the United States cannot efficiently build and safely operate new, large, unique, dangerous nuclear facilities and reactors, any more than the U.S. could now build Saturn rockets or put a man on the moon.

Oh we could go to the moon, you may say, if we really wanted to.  I think not.  I also suggest that our focus on earthly problems instead of lunar ones is now necessary and an indication of the changed circumstances in which we find ourselves.  We don’t have the energy, literally and culturally, for such crude exhibitionism.  Nor can we afford the perchlorate contamination.

In part our nuclear blinders have slipped a little.  We now see that most of the facilities we built in the 1970s (few were built in the 1980s) really never were as safe (or safely-located) as their promoters claimed; many of us knew this at the time.  But the problem is more than one of perception.

“Dark inflation” is just one possible name for the mysterious part of the cost increases that occur when high-vaulting technical ambitions – nuclear, in this case – collide with inchoate industrial, economic, and social decline.

There is at least some awareness of this phenomenon in the nuclear weapons complex itself.   In February 2013, Charlie McMillan, director of Los Alamos National Laboratory (LANL), said:

On the facility front we also must innovate.  I am concerned that in the current fiscal environment, it may no longer be practical to build large, high-hazard nuclear facilities.  A new path forward is needed. Following the decision to delay construction on the CMRR Nuclear Facility, I have challenged the team at Los Alamos to explore alternatives that would provide the capabilities of CMRR but do that in ways that would be simpler.  Based on the work they have done over the last year, I believe we should look at designing and building small, individual facilities to meet specific tasks of supporting the stockpile.

It may seem easier to envision a large signature facility that does all things nuclear. But the reality is – the time frames needed to build them have simply become too long.

Long time-frames mean more exposure to dark inflation.  (Ordinary inflation does not increase the real cost of long-term projects because present-value cost calculations, if competently done, remove it.)

Dark inflation exposes projects to risks.  Chief among these is the possibility that inherent weaknesses in the project’s raison d’etre may be discovered.

McMillan is not alone in this assessment.  An independent government analyst said to me this year, “The days of the ‘big-box nuclear facility’ may be over.”  He did not say why.

I agree with these negative assessments (but not with the supposed need for new small individual plutonium facilities – the “charm bracelet” or “Brussels sprouts” plan as somebody recently called it).  And I think much more change is coming, and much sooner than official Washington realizes.  Dark inflation, not just of costs but of the risks of not completing projects and the risk of not being able to operating them safely and cost-effectively, is increasing.

Returning to last Thursday’s discussion, we aimed at a glimpse of the big picture some of us see behind these inflating risks, over and above what must now be seen as ordinary poor management.

I want to explain, as succinctly as I can: why real economic growth is over and will never return; why complexity, long project gestation, and expense are more potent problems than in the past for large-scale technical endeavors (including those to which we might turn for energy); why New Mexico now faces an unprecedented economic and environmental crisis, more so than most or perhaps all other states; and what all this means for liberal reform, assuming there ever is any – namely, it will be overtaken by events (OBE).

I want to dispel the widespread misconception on the political left and right about the permanence of today’s apparent economic and social arrangements.  Somehow people think that the world of, say, five or ten years from now will be fairly similar to today’s.  It won’t be.  I say “apparent” because what we think we see today is largely a product of our cultural imagination and propaganda.  When the smoke and mirrors fail, the apparent change could be very sudden, even faster than the actual change, which as transmitted and amplified through our bankrupt financial system could be quite fast indeed.

We had an interesting discussion Thursday and I want to summarize it in another post.  Meanwhile, as regards one of the main topics we lightly covered –oil production, now at an apparent historic peak – we’ve posted a few useful recent references on our web site.

It almost goes without saying that few of us “see” resource issues, such as the efficiency of our primary energy sources.   We see only prices and economic conditions.  Any underlying resources issues, any inflation they cause, and any decrement of growth related to them, will always be “dark” to us.  Such issues are of course expressed in a social, political, and institutional context that we generally take for granted and believe (for good historic reasons) to be difficult to change.

But very great changes are willy-nilly upon us.  What can’t continue, won’t.

Next time I want to take up in a little more detail why assumptions of economic normalcy for the remainder of the present decade are misplaced.